OT BOARD MEMBER OTGOCHULUU: GOM, OT, AND RIO TINTO ARE ALL SITTING IN ONE BOAT NOW

Mr. Otgochuluu, OT board member and director of Strategic Policy and Planning at Mining Ministry, gave brief interview for BloombergTV Mongolia. He commented on the London meeting and said, “The main achievement of this meeting was rebuilding the trust between GoM and Rio Tinto. Before the meeting, there were at times, Rio Tinto and GoM were distrustful to each other. The both parties replaced representatives in the discussion level. Rio Tinto also had made replacements and London meeting was between new groups of young people willing to work through all the issues.  GoM, OT, and Rio Tinto are all sitting in one boat now.
We [GoM, Rio Tinto, and OT] are faced with competition in the global market in terms of getting financing and expanding our market share. Most importantly, the both parties agreed to continue the project by business principles.” He also added that acquiring EntrĂ©e Gold’s licenses made it possible to increase profit to Mongolia by $1.4 bn.
On reporter’s question on cost overrun& underground mine financing, he said “Mongolia’s GDP is only little over $10 bn, but Rio Tinto has $100 bn in assets. So, $2 bn may not be a big issue for Rio Tinto, but it is a very big number for Mongolia. Audit conclusions are made by both parties on OT LLC’s costs. Now we’re working on comparing these 2 conclusions. We’re trying to figure out if the $2 bn was spent with a purpose of accelerating the project or spent on extravagant budgets& inefficiency.  In general, GoM is emphasizing cost cutting, at the same time, Rio Tinto is more interested in accelerating the project.  In brief, GoM agrees that the loan financing is a viable solution. Both parties are working towards agreeing on the loan terms such as total amount, collateral type etc. Most importantly, the loan financing shall keep the initial, agreed-on profit ratio for both parties. “
“OT agreement in brief: OT project duration is 50-60 years. Total estimated revenue is $120 bn. First stage financing is $5bn, underground mine financing is $8-9bn. Total expense is $30 bn, and major repair and maintenance cost is $15bn. Therefore, approximately, $60 bn is left for net profit. Out of that $60 bn, 50% (30 bn) will be attributable to GoM for dividend, resource usage fee. The investor gets $23 bn for dividend and $2 bn for management fee, which is around $25 bn in total (after deducting any other taxes). So, according to the agreement, GoM will get $34 bn from net profit, and investor will get $25bn.”

Source: http://www.bdsec.mn BloombergTV Mongolia, Politics Briefing Newspaper


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